PGIM's Hyat Warns Investors Not to Overreact to Coronavirus Threat

Channel: Bloomberg Markets and Finance
Published: 8 hours ago

Description
Jan.27 -- Taimur Hyat, PGIM chief operating officer, discusses how the outbreak of the deadly coronavirus is impacting financial markets with Bloomberg's Vonnie Quinn on "Bloomberg Markets."



Transcript
Does this qualify as a black swan event, or would it have to be sustained this market sell-off and treasury buying? I think it would have to be sustained more. What is what is unique about the kinds of risks we are seeing now money, whether it's political risks and the bombshell you mentioned, whether it's climate change, which is a big topic at davos, whether it's the coronavirus is there very no ...
linear and therefore very hard for investors To figure out how they'll work - and i think this would be very different from 2003 and the sars virus, which is where everyone's running back to think about what will happen here - that costs about 40 50 billion dollars. It took two percentage points off china's gdp, but i think the world is very different. It'S much more globalized as much more international travel supply chains are much more integrated into china. The credit cycle is at a much later stage. How this plays out, i think, could be quite different from sars and i think it's still in very early stages in some senses, though, that gives room for there to be a lot more of a reaction right. If this does continue - and there isn't a vaccine found - you just mentioned - how much bigger chinese economy is 14 trillion dollars and how supply chains are more integrated? Would that not prove more difficult than to overcome? I think whether it plays out anything like that or whether they can dampen it down now is still a very open question. I think a lot of what we've seen varney is a flight to safety, more kind of retail and intermediary money or shorter term money that wants to take risk off the table. I think the longer term more sophisticated investors we work with are sort of still seeing where this play is long-term. If you look back in the past have often been big up swings after such events, so i think one of the key messages we'd have is don't overreact, but really try and understand the nonlinearities of this specific pandemic. Are there any lessons to be learned beyond what you just said about this sell-off, though our investors, potentially just looking for a reason to lock in gains, because my gosh, the cycle has been going on so long that there must be something coming? I think we had this very unique mix of two factors: that sort of the secular, late demographic cycle where you have aging populations and investors who haven't quite figured out that long-term growth in an aging population, most developers is going to be sub 2 percent. For the us and europe and you've got this little cycle where there are glutes developing in certain parts of the inexperienced part of the private credit market parts of real estate.

So there's lower slower growth, combined with uncertainty about how to play the late part of the credit cycle and then, when you combine that, with the amount of political risk, whether it's the uk or china in the us investors are quite skittish and should be an out. Quite prepared for lots of vulnerabilities that can throw things off, but that's just where we are in the cycle. I think.


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